CNN Money reports that retailers are poised for a major victory in the Wall Street reform bill currently pending in Congress. The Senate adopted an amendment late Thursday that will slap sharp restrictions on the fees issuers levy every time a buyer pays with a debit card.

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Called “interchange” fees, the charges typically consume 1% to 3% of every transaction run through a debit or credit card. Network operators like Visa (V, Fortune 500) skim off a fraction of the fee, while the rest goes to the financial institution that issued the card. Those tiny slivers add up fast: Industry kingpins Visa and MasterCard collected interchange fees of at least $35 billion in 2007, according to government estimates.

The new Senate amendment adds two major restrictions to the rules on interchange fees.

First, it requires that the fee be “reasonable and proportional to the actual cost incurred” by the payment network or issuer for processing the transaction.

The Federal Reserve will have leeway to determine what counts as a “reasonable” fee, but it’s likely to be a lot lower than the current rates. In response to an antitrust probe, Visa Europe recently announced plans to cut its interchange rate to 0.2% on some debit-card purchases, echoing an earlier move by MasterCard. Rates in Australia are capped by regulators at 0.5%.

Second, it allows sellers to offer a discount to customers who pay with cards that carry lower transaction fees.

That’s a change merchants have sought for years. They’re currently contractually obligated to accept all cards on the same terms. If American Express (AXP, Fortune 500) — which has some of the industry’s highest interchange rates — costs a merchant more to accept than a Visa card does, the merchant can’t offer buyers a discount for using Visa.

Backed by Senate Majority Whip Richard Durbin, D-Ill., the amendment passed the Senate 64-33. It’s now part of the broader financial reform bill the Senate hopes to finalize next week.

That the proposal has made it this far is a major victory for retailers, especially small ones, who have fought for years for regulatory curbs on what they view as the monopolistic practices of Visa, MasterCard (MA, Fortune 500) and other payment network operators. For businesses with slim margins, like gas stations and convenience stories, interchange fees can devour or even eliminate their profit on sales.

“It’s a wonderful thing,” 7-Eleven shop owner Dennis Lane said Thursday on hearing of the amendment’s adoption. “This is a really personal thing for me. Life is one big negotiation, but not with credit card companies.”

Lane, the former head of the National Coalition of 7-Eleven Franchise Owners Association, has been an outspoken foe of interchange fees. For 36 years, he has owned a 7-Eleven outlet in Quincy, Mass., which has a staff of 12 and annual sales of $2.5 million. Next to labor, credit-card fees are his biggest operating cost — and they’re the only cost he has no control over.

“In 10 years, the fees have doubled,” he said. “If I sell a Boston newspaper, I make approximately 6 cents. If someone whips out plastic, I might as well hand them the paper for nothing, because it costs me 12 to 14 cents to sell them the paper.”

 Read more at: CNN Money